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Tuesday, 21 July 2015

Is Neuberger Bergman The New Blackstone Group?

FPM’s ‘NoSmokeWithoutFire:Reputation’
propagating enterprise is researching prospective ring leader Neuberger Berman
Group LLC (an independent employee-owned investment firm established in 1939) and
its investment affiliates for signs of illegal capitalism. Since our illuminating investigation into
insider trading by Steven A. Cohen’s eponymous SAC Capital, and involvement of Blackstone
Group as its biggest investor, we have compiled public domain surveys, and presented
privately commissioned ratings of an entity’s reputation by degrees. This monitoring
survey is mockingly entitled 'Potential
Rogues And Affiliates Trading' - as below.

The rationale for organising and connecting Neuberger
Bergman – "NB" affiliate map are manifold. One rationale we look at here in depth derives
from the nature and contradiction of a class of investment funds known as ‘liquid alternatives’. Namely, “Neuberger
Berman Absolute Return Multi-Manager Fund” ,
is an approximately US$2 bn mutual fund listed on the NASDAQ stock exchange in
New York.

This NB thematic hybrid fund depicts FPM convergence demystification in the asset management industry; where
returns of constituent fund managers are being arbitrated as more NB profit rather than full investment returns, even though the stake for investment is mostly the client's money. In fact the key appeal and popularity of the liquid alternative category is for American pension savers or 401K plans. Hedge funds are not intended by nature to be liquid, but this mutual fund version is structured so; which for the next contrived manipulated market panic selling due to idiosyncratic or systemic risk, will intrinsically show appropriate losses. Woe to the pensioners and the feeding trough they really represent under crony corrupt capitalism!

Indeed like the mentioned early days of Blackstone Group,
there is a private equity division of Neuberger Bergman known as Dyal Capital Partners which sponsors
emerging and existing hedge funds via stakeholding. As far as we can tell there are no cross-over holdings between Dyal and the NB liquid alternative mutual fund. FPM is familiar with the co-heads of that
business having worked with the team in their former guise as a Lehman Brother
division. This is food for monitoring ‘Alt M&A’ transactions. This corporate finance / rain-maker / deal activity
is expected to be invigorated during the cyclical ‘shake-out’ from the next capital
market turbulence [of a nature and type never seen before].

Under FPM’s trident mission statement this US$251 bn asset
manager NB ticked all the boxes; with its divisions’ activities in hedge funds
and private equity comprising FPM’s triumvirate application primarily in alternative
investments headed simply ‘Convergence’, ‘Alt M&A’ and ‘NSWF:Reputation’. The relatively new Blackstone Group Inc was formed only 30 years ago in 1985 yet has greater assets under management - AuM, closer to US$333 bn. This juxtaposition of Blackstone with Neuberger raises question of business strategy with the meteoric growth of the former compared with the age venerable latter.

FPM have a stuff and nonsense view of liquid alternative
investments. A category with an estimated US$234 bn[1] of
monies invested must have an investment rational merely for its existence.
However, the terms ‘absolute return’ fused with ‘mutual fund’ is a misnomer and
contradictory by their original natures, which FPM invoke as simply
‘convergence’ of traditional long-only investments with edgier fandangled branded
alternative investment category i.e. hedge funds. This confusion with
nomenclature is asserted to investors as liquid alternatives.

Nothing about this NB multi-manager fund is reminiscent of a
fund of hedge funds and the implied premise of absolute returns. It is at first
glance merely an appeasement offering, like water for chocolate, as far as
investors are concerned. Don’t take our word for it, look at the price action
in Yahoo chart below since launch. And if you believe the smarter investors
should be institutions rather than individuals then it was reported that only
20% of the fund’s investors are institutions.

NB Absolute Return Multi-Manager Fund Performance

Additionally, the real proof of a vehicle with ‘Absolute
Return’ in its name should be stellar hedge fund performance. Yet average
annualized returns of 5% over its three years existence is not a significant or
remarkable track record, even in an era of zero cost-of-money, and beating the
average hedge fund benchmark - See table above. Veritably the tell tale signs of the multi-manager
vehicle is the convergence of active management alpha-seeking strategies with
passively managed beta-tracking. The real raison d’etre for this fund is the
way Neuberger Bergman allocates the fund investor’s money between its
hand-picked hedge fund affiliates. NB has segregated account with each of its portfolio
constituent manager, and therefore has look-through potency at the portfolio
companies. This has many potential alternate alpha-return interpretations,
least of all of them being to reduce investors’ operational risk!